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The Partnership charter

Millions of people co-own closely held companies, family businesses, and business partnerships, but establishing them and keeping them together is never easy. Here, finally, is the guide they have been waiting for.... Read More

Keeping Cool: The Art of Family Negotiations (Part 1 of 2)

Negotiations are a critical part of any relationship. Husbands and wives, parents and children, business partners, world leaders – all have to agree on how they will live and work together. Discussions may be formal or casual and they may not seem like negotiations, but ultimately, all of us do negotiate about “who does what,” “who gets what” and “who deserves what.” These exchanges must result in productive and mutually satisfying results if a relationship is to survive and thrive. This two-part posting includes the factors that make negotiations difficult in the first part, then strategies to avoid the pitfalls in the second post.

The emotional tone – and efficacy – of these negotiation exchanges can vary widely. That’s why we have a host of nouns to describe them, ranging – per the thesaurus – from gentle (discussion, confab, consultation and huddle) to cool (bargaining and negotiations) to heated (haggling, argument and confrontation). In family businesses, these exchanges often start out gently but rapidly pick up heat and leave burned fingers or bridges in their wake. Knowing why this happens – and how to avoid it – is one of the keys to the long-term success of both families and the business ventures they own.

What are the factors that can make negotiations within a family business so difficult? They are generally rooted in the unique duration and intensity found in family relationships, especially family business relationships. Some of the most common factors include:

Big Stakes: Uniquely complex and consequential issues arise in family businesses. Who will run the business? Who will own the business? Who has sacrificed most for the business? Who is closest to Mom or Dad? What are fair salaries, bonuses, distributions and perks for all family members? All of these questions evoke a potent mix of economic interests, self-image and family status. Emotions are inevitably heightened when so much is at stake. Often those emotions can insidiously take charge – and it is difficult to maintain successful negotiations when emotions are calling the shots.

Time Warps: Family members often become trapped in time warps. They continue to view one another as they first did decades ago. Parents may not see how their children have grown and developed as highly capable adults and business people. They are still just the “kids.” Adult children, in turn, may still see their parents as ten feet tall and a necessary target for self-liberating rebellion. Sisters and brothers may harbor resentments and negative stereotypes of each other based on rivalries from childhood. Successful negotiation is almost impossible when each side is dealing with a phantom of their own imagining rather than the real person across the table.

Hidden Agendas: All too often, a discussion about ownership shares or compensation is interpreted as an argument about who is loved most or who has succeeded best in life. This can be the most frustrating category of family business negotiations. Discussions, proposals and concessions on the ostensible topic seem to go in circles – and they often do because they aren’t the real subject of the exchange.

Presumptions: Because we believe we know our family members so well, we will often presume that we know what they want, what they feel – even what they are going to say! Successful negotiations depend on an accurate understanding of what all the parties think and feel. To do that, you have to ask, listen, and not presume.

What can be done to avoid these pitfalls? These strategies will be reviewed in the concluding second part; and as may be expected, they involve thorough preparation before negotiations occur.